US Natgas Continues Plunge On Unexpectedly Mild Weather For Mid-December 

US Natgas Continues Plunge On Unexpectedly Mild Weather For Mid-December 

U.S. natural gas futures continued an epic plunge Monday after weather forecasts show temperatures across the U.S. will be well above seasonal trends through at least the mid-point of December. 

Contracts for January stumbled 8% to $3.80 per million British thermal units, the lowest intraday price since late August. Prices have slid upwards of 40% since early October as it first became apparent the U.S. had ample supplies of natgas, and temperature forecasts were beginning to show warmer weather trends. 

Bloomberg’s two-week outlook shows mean temps across the US-Lower 48 will be well above a 30-year average through Dec. 21. At some points, temperatures could be 10-degrees Fahrenheit over the seasonal averages. 

Above-average temperatures mean heating demand for building structures, such as homes and businesses will decline. This is reflected on the US-Lower 48 heating degree day chart below. 

Due to warmer weather and the rising supply of natgas from the Marcellus shale region, Morgan Stanley wrote in a note that prices are skewed to the downside. The bank sees natgas prices averaging around $3.75 in 2022. 

Another way to view the natgas market is through the so-called ‘widowmaker‘ spread between March and April Henry Hub contracts. In early October, the spread soared to $1.90 per million British thermal units as traders bet on tight inventories and cold temperatures but have since reversed to now 23 cents, a complete collapse as outlooks forecast mild weather.

Across the Atlantic, European natgas markets are the complete opposite as the continent struggles with low supplies and frigid temperatures. 

Tyler Durden
Mon, 12/06/2021 – 11:59

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Author: Tyler Durden

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